Manhattan Apartment Weakness Spurs Tighter JPMorgan Jumbo Loans

[Klaralven]

JPMorgan Chase & Co. is getting bearish on Manhattan apartments.

The lender will tighten the terms of mortgages it finances for most co-operatives and condominiums in the borough, according to a Nov. 4 notice sent to loan professionals. Chase will limit jumbo loans to 70% of the sale price starting next week, down from 80%.

Slackening buyer demand has sent Manhattan sales plummeting during the Covid-19 pandemic. The change suggests JPMorgan sees more price declines to come in the borough. It could also depress deals further by forcing buyers to come up with bigger downpayments when they are already stretching to purchase in one of the costliest U.S. housing markets

“If it were to become a widespread, across-the board policy for all banks, it would definitely slow the market,” said Stephen Kliegerman, president of Brown Harris Stevens Development Marketing, who confirmed Chase’s new lending rules.

...

Signed contracts for Manhattan co-op apartments fell 4% in October from a year earlier, according to appraiser Miller Samuel Inc. and Douglas Elliman Real Estate. Pending condo deals plunged 28%.

https://www.bloomberg.com/news/articles/2020-11-06/manhattan-apartment-weakness-spurs-tighter-jpmorgan-jumbo-loans

[PJMcK]

1. Not surprising, actually

Several months ago, there was an article in the NY Times that used publicly available information that showed that 40% of New Yorkers who lived on the Upper East and Upper West sides of Manhattan had left town and were living elsewhere due to the pandemic.

It follows that apartment sales in the city, (perhaps others across the country, as well), would suffer a steep decline. The financing follows in the logical progression of events to buy an apartment. Banks don't want to get stuck with properties that are over-valued or over-financed.

Curiously, there is a bustling real estate business in the rural areas around NYC. Upstate New York, Connecticut and Pennsylvania have seen an uptick in sales. A recent story about a house in Roscoe, NY is illustrative. A 1,500 square foot, 3 bedroom house with 3-1/2 acres of woodland was listed at roughly $349,000. A bidding war ensued and the property sold for $375,000! By the way, none of the bidders had even seen the property in person!

Our economy is in for a rocky ride, I fear.

[Klaralven]

2. Your NYC job is now your NJ home office job. Where should your taxes go?

Daniel Rosa doesn't miss his 90-minute — on a good day — commute from New Jersey into New York City, a bygone hassle for the systems administrator, who is working from home because of the coronavirus pandemic.

Yet even though Rosa doesn't go to New York anymore, a slice of his paycheck still does. And those thousands of dollars paid in income taxes left him to wonder: Why, as a New Jersey resident now working remotely in the Garden State, does he still pay taxes to New York?

“I live in New Jersey; I want to support New Jersey," he said. "If the rule is you pay taxes where you work, that’s what I want to apply.”

For NJ residents: Here's when you'll get Senior Freeze, Homestead Benefit payments

Every year commuters including Rosa, of Manalapan, collectively pay billions of dollars in income tax to other states. But with the coronavirus pandemic closing offices and shifting many employees to work from their homes in the Garden State, a debate is brewing about which state those billions should benefit.

A bipartisan group of New Jersey lawmakers say New York in particular is unfairly taxing Garden State residents who are now working from home and whose tax dollars should stay in the state.

New Jersey may soon take an initial step to quantify how much it could gain if New York stopped taxing remote workers, wading into what could become a political war with its next-door neighbor.

https://www.app.com/story/news/2020/10/29/nj-residents-working-home-covid-coronavirus-ny-income-tax/3746721001/

This is getting traction in the NJ legislature.

Also, a lot of the bigger NYC employers also have business locations in NJ that they can reassign workers to.

[PJMcK]

3. This is a difficult issue

Personally, we have a NYC rental apartment (it's a real steal!) but we retreated to our house in the Pennsylvanian Catskills in early March. The uncertainty that the coronavirus presented was untenable for us since we're each in a couple of high-risk groups.

So, we've been living outside of New York State for more than half the year. Do we pay taxes in our legal residence of NY or can we legitimately claim PA residence for tax purposes? It would save us about 50% on state income taxes. Frankly, I don't want to have the IRS anything to flag so we'll probably file in NYC this year.

We'll see about next year.

[Klaralven]

4. It's really complicated depending on your residence, employer & usual location, actual work location

I worked for a firm with HQ in NYC at a NJ location. I kept my visits to HQ and NYC operations to a minimum because it was my understanding that otherwise I would have to file NY and NYC non-resident income tax. That sort of indicates that NY thinks that you should be taxed where you work. I also believe that pro sports players pay income taxes in all the state that they play in, even though their residence might be in a no income tax state like Texas or Florida where they spend the off season.

Also, years ago I worked (different firm) with some NJ residents who normally worked in NYC. They were happy to come to meetings at my location in NJ because they said it saved them a day of NY and NYC tax. So I think that if you are an NJ resident you could prorate your income between NY and NJ on the share of days worked.

However, I am not a lawyer or tax accountant.

PS - NH and MA are currently in a fight over this as well. I think MA is arguing that it is owed taxes on days worked at home in NH because it is being done at the convenience of the employee and not as a business requirement of the employer.